# hw3 - The Colorado College Department of Economics and...

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1 The Colorado College Department of Economics and Business Block 5 Econ 151 Homework # 3 1.(a) The following information gives the price and quantities of CDs sold of a music recording company. Price Quantity of CDs \$24 10,000 22 20,000 20 30,000 18 40,000 16 50,000 14 60,000 The company can produce the CD with no fixed cost and a variable cost of \$5 per CD. (i) Calculate the total revenue, marginal revenue, total cost and profits for the firm. (6 points) (ii) What quantity of CDs should maximize profits? What would the price be? What would the profit be? (2 points) (b) (i) Define natural monopoly. What does the average cost curve of a natural monopoly look like? (2+2=4 points) (ii) Why is the monopoly’s marginal revenue less than the price of a good? (3 points) 2. (a) Graphically depict the deadweight loss caused by a monopoly (3 points) (b) What is price discrimination? State two conditions required for price discrimination to take place. Movie theaters charge a lower price for students and senior citizens then the

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## This homework help was uploaded on 04/19/2008 for the course EC 151 taught by Professor Ghosh during the Spring '08 term at Colorado College.

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hw3 - The Colorado College Department of Economics and...

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